Gold’s Daily Cycle is offering up very few clues as to its short term intentions. The Cycle remains Left Translated, and that typically is a bearish omen for any Cycle. If this had been the final Daily Cycle, then by Day 18 this Left Translated Cycle would have failed (below $1,555) and be well into new IC lows by now.
So I believe we’re now in a Day 18, 1st Daily Cycle (new Investor Cycle) that is just having trouble catching a bid. The fact that it will not sell-off is very positive, it suggests that gold has found a floor that is going to be defended. The area between $1,526-$1,600 has been well traversed these past 18 months and holders of gold in this area appear willing to defend it.
But the type of demand required to drive gold back out of this range and up to test the $1,800 resistance line is currently just not present. While the equity markets soar to new highs, we find that the entire Precious Metals sector is being ignored. We’ve actually experienced an inverse move of late where the PM sector has been sold at almost the rate that the equity market was bought (See correlation in chart below).
But as I do not see this current Daily Cycle being a 6th or 7th Cycle, I’m to assume that this is a new Week 4 Investor Cycle. The depths reached by the prior Investor Cycle, both from a Cycle count and a technical standpoint make it very difficult to support any other alternative.
So the question is why as a 1st Daily Cycle we have not seen a more powerful move. It’s a valid question, for which I believe it’s due to a combination of fear and greed. Unlike the 2008 collapse that was relatively quick and generally an across the board asset sell-off, this period has been very gold market Cycle specific. After 18 months of stop and start punishing action, there is now a general fear out there that the gold bull market is over. Although investors are willing to defend gold at these levels, the fear has become so pervasive to the point where investors have fled and those who remain are paralyzed.
The second reason for gold’s impotence is greed, or lack thereof. One class of investor is willing to defend the asset at an established floor, but it’s a broader array of investors who are needed to push gold into a new sustained rally. It takes the smart money to start a move and would be followed by speculative interest that drives the price higher. So I believe that while the equity markets continue to forge new highs, the entire PM sector is going to remain in the back seat.
This as is an excerpt from weekend’s premium update published on Saturday (3.16) focusing on the Gold Cycle from the The Financial Tap, which is dedicated to helping people learn to grow into successful investors by providing cycle research on multiple markets delivered twice weekly, as well as real time trade alerts to profit from market inefficiencies. They offer a FREE 15-day trial where you’ll receive complete access to the entire site. Coupon code (ZEN) saves you 15%.